Canada's most ambitious green energy plan failed—but not for the reason everybody thinks

The basic formula for fighting climate change in an energy-hungry world seems simple on the face of it: For every watt of dirty electricity, substitute one of its clean cousins. Coal becomes wind, oil becomes biofuel, natural gas becomes solar. Easy as a two-slice pie chart. You could draw it on a napkin over an organic craft beer or two. Keep redrawing, year by year, till it’s one big green circle.

It might be an oversimplification, but this formula is the basic premise of Ontario’s landmark Green Energy and Green Economy Act, commonly known as the Green Energy Act or GEA. Its enactment in 2009 by Dalton McGuinty’s Liberal government represented one of the most significant energy policy overhauls in Canadian history.

No doubt, McGuinty and his fellow Liberals hoped the GEA would lead to projects such as the Bow Lake Wind Farm, under construction in a patch of heavily forested Crown land near Lake Superior Provincial Park, an hour and a half drive north of Sault Ste. Marie. The first twelve of the farm’s thirty-six turbines began generating power in early August. When complete, the installation will harness the strong lake winds to the tune of 58.3 megawatts, enough to power 15,000 homes.

The project began as a collaboration between an experienced developer, Calgary-based BluEarth Renewables Inc., and the Batchewana First Nation, whose traditional territory includes the site. (The joint partnership’s legal name, Nodin Kitagan, is Ojibwe for “wind farm.”) There was a dispute with a neighbouring First Nation about territorial boundaries at one point, as well as a few hard questions about sullying a landscape immortalized by Canadian painters. But otherwise, the five-year development process has played out smoothly—a happy partnership between an entrepreneurial green energy business and an Aboriginal community, working together to feed the provincial grid, create jobs, and develop expertise in a burgeoning technical field.

When the GEA launched with soaring rhetoric, the expectation was surely that communities across Ontario would welcome many such projects. Yet Bow Lake is an anomaly—one of the few green energy operations that managed to take root without rancour amid six years of clumsy policy implementation and ferocious resistance. The act itself has been so whittled down by amendments that it is now effectively defunct. Large-scale projects are no longer eligible for the incentives that were originally offered, and the volume of eligible small-scale undertakings has been capped.

Bow Lake, in other words, is a monument to what could have been. As jurisdictions across Canada consider adopting their own renewable energy incentives, an analysis of how this corner of Ontario became one of the few places to embrace the GEA fully offers vital lessons in how to get such transformations right.

To understand theGEA, it is necessary to understand the wonkily named “feed-in tariff” scheme at its heart. Under FIT, Ontario power grid operators were obliged to buy electricity from renewable sources at rates far greater than those paid for power from conventional sources (and greater than rates set under its predecessor, the Standard Offer Program). The mechanism is meant to harness simple microeconomics: pay a higher price for something, and suppliers will ensure they put more of it on the market.

The more theoretical justification behind FIT is that the non-renewable market price is artificially low, since it typically does not reflect the full environmental and social costs associated with fossil fuels. Rather than penalize dirty power to capture this unpaid cost, the GEA’s drafters instead used FIT to reward renewables and thereby shift demand away from carbon-based fuels.

According to its most expansive definition, green energy encompasses those sources that do not generate greenhouse gases, including the enormous nuclear and hydroelectric plants that provide Ontario with the bulk of its power. But FIT was aimed specifically at smaller, decentralized renewable energy technologies—true renewables, as they are sometimes called. The GEA’s premium prices applied to solar and wind power, small-scale “run of river” hydropower, biomass plants running on waste wood and the like, and biogas produced from farm and municipal waste.

The model for Ontario’s law was Germany’s venerable feed-in tariff, which was enacted in 2000 and catapulted that nation to the global lead in renewable energy. Under its FIT, the share of renewables on the German grid has grown to 31 percent from less than 6 percent. The country’s legislation not only set prices for renewable energy at a level high enough to ensure profitability in the near term, it also guaranteed those prices for twenty years, thereby providing investors with long-term peace of mind. The resulting boom rationalized whole sectors of the renewable energy business. Before 2000, for example, solar installers all over the world had to make do with unreliable inventories and a mishmash of suppliers. Germany’s boom fed the construction of some of the first high-volume, low-cost photovoltaic panel production lines anywhere.

Germany’s FIT seemed well worth emulating. And by the time Ontario considered creating its own version in the late 2000s, the concept had been adopted in dozens of other jurisdictions. The provincial energy minister who championed Ontario’s iteration, George Smitherman, became enthusiastic about the FIT concept following a 2008 meeting with Hermann Scheer, the German parliamentarian who co-authored his country’s trailblazing legislation. After fact-finding trips to Europe and California, Smitherman unveiled the GEA in early 2009 and set off across Ontario on what one reporter described as a “sales mission.”

The Green Energy Act, Smitherman wrote in the National Post, “will revolutionize the very way we create, deliver, conserve—even think about energy.” He spoke of drawing on “best practices from around the globe” and creating “green-collar” employment in a province suffering a manufacturing malaise. What’s more, the act would “put power in the hand [sic] of the people,” giving every homeowner in Ontario the opportunity to put solar panels on his or her roof, connect them to the grid, and “become an electricity generator.” Speaking to a receptive crowd of Liberal loyalists in the hard-luck city of Welland that April, Smitherman vowed, “We’re going to make it very, very easy.”

Without question, the GEA produced some real and durable successes. The last of the province’s coal plants closed for good in April 2014. On a watt-for-watt basis, coal exacerbates global warming more than any other industrial-scale fuel source, and Ontario’s coal phase-out remains the single most significant climate change–mitigation achievement undertaken anywhere in this country. Moreover, by the end of 2014, the GEA had ushered in more than 4,000 megawatts of grid-fed wind and solar energy, tiled the roofs of thousands of warehouses and schools with solar panels, and created at least 31,000 green jobs (by the government’s estimate). More than thirty companies have established or expanded renewable energy manufacturing facilities in Ontario since 2009, and the province shares primary credit with Quebec for improving Canada’s standing from twelfth to seventh among G20 countries in clean technology investment.

But there is a reason that Ontario has become as much a cautionary tale as a shining beacon to green-minded politicians and energy experts. Smitherman was fundamentally wrong on at least one key detail: the GEA never made it truly easy for a homeowner to put solar panels on his or her roof, nor for wind energy developers to fill fields with turbines. While Bow Lake is viewed as a win-win operation, that is not true of projects in many other parts of the province, where green energy became the focus of divisive local battles.

In rural Ontario, GEA initiatives often led to tense Environmental Review Tribunal hearings. The first visible signs of the act were a few enormous and controversial wind farms (which had actually been approved under the previous renewable energy incentive). Meanwhile, reactionary opponents such as Ezra Levant cited the purportedly horrific impact of turbine blades on bird populations (in reality, they kill far fewer birds than the lights left on in office towers and the claws of domestic cats). The umbrella group Wind Concerns Ontario now counts more than forty community anti-wind groups as members, and approximately eighty municipalities have passed explicit “unwilling host” resolutions against turbines.

A particularly shrill battle in Prince Edward County—a scenic region in southeastern Ontario renowned for its vineyards and used as a rural retreat by influential urbanites—illustrates how such spats have played out. In May 2010, a company called WPD Canada (a German developer’s newly created Mississauga subsidiary) received a FIT contract to build a twenty-nine-turbine farm near the southern tip of the Long Point peninsula, which extends into Lake Ontario. Amid legitimate concerns about the visual impact for tourists, public meetings soon ran thick with misinformation. (A representative from North American Platform against Windpower, for example, claimed the iconic turbine on Toronto’s waterfront was no longer connected to the grid and spun its blades with the help of a hidden gas-powered engine.) That October, Prince Edward County’s largest town, Picton, hosted the Society for Wind Vigilance’s “first international symposium” on the health effects of turbines. It featured outspoken climate change denier Ross McKitrick and Nina Pierpont, the American pediatrician who coined the pseudo-medical term “wind turbine syndrome” to describe a host of health complaints that have never been scientifically linked to the production of wind power. While their arguments were bunk, outraged cranks used social media to build grassroots organizations and to acquire the sheen of professionalism and scientific expertise.

On the campaign trail in 2011, Ontario Progressive Conservative leader Tim Hudak lambasted the Liberals’ “expensive energy experiments,” claiming they would bleed the province of hundreds of thousands of jobs. (Hudak sabotaged his own case with ludicrous overstatement, citing a figure of 345,000 endangered workers—which would have amounted to 5 percent of the entire provincial labour force.) Commentators at the right-of-centre National Post, meanwhile, derided the act as “magic wand” thinking by “dreamy-eyed bureaucrats.”

By 2014, McGuinty had resigned in disgrace, leaving behind a reeking political mess in his energy file associated with a pair of cancelled natural gas power plants. Under successor Kathleen Wynne, the Liberals studiously avoided the GEA in their re-election campaign. Today, FIT is all but gone, and renewable energy has returned to a process of top-down procurement. As for the act’s champion, Smitherman resigned from cabinet in January 2010 to run for mayor in Toronto, just months after the act became law. The GEA did, as he promised, change the way Ontarians think about green energy—but the cast of such thoughts has often been negative. Instead of it becoming a byword for progressive values and industrial innovation, many voters dismiss it as an expensive and clumsy subsidy with too little upside to justify its cost.

But by concentrating their fire on the broad political and ideological forces at play, even many of the GEA’s harshest critics ignore the most important reasons it failed. As the example of Bow Lake demonstrates, the principles behind the act were theoretically sound. It’s the implementation that was flawed.

Explaining these flaws requires a closer look at the guts of the GEA and the regulatory apparatus that drove it. The details may seem obscure, but in several cases they were the subject of explicit warnings from the German policy-makers who’d developed the FIT concept in the first place.

One clause of the act, for example, demanded that a minimum percentage of green energy–generating equipment be built in Ontario—an obvious sop to the province’s manufacturing sector. This had the effect of distorting the marketplace, reducing supply options for equipment purchased by start-ups, and running afoul of World Trade Organization rules. (The German model, by contrast, keeps energy-pricing policy entirely separate from manufacturing subsidies.) Then there was the sky-high tariff rate of 80.2 cents per kilowatt-hour, initially set for small rooftop solar installations, which provided an easy statistical rallying cry for FIT opponents. The price was an order of magnitude higher than the lowest rates then paid by Ontario retail consumers, and was chosen mainly in order to exceed the highest known rate being charged for solar anywhere else.

Given the way debates over such issues unfold in the arena of AM radio call-in shows and newspaper op-eds, it is not surprising that electricity prices, not job opportunities or cleaner skies, became the public focus. By the time studies showed that less than 10 percent of the average Ontarian’s energy bill went to renewable power, many in the province had already begun to blame the act for any increases they saw in their monthly energy costs.

The clumsy rollout of the GEA stands in stark contrast to the meticulous, strategic approach Hermann Scheer and his allies took to bring green energy to every corner of Germany. Even before the German FIT was passed, Scheer launched the 100,000 Solar Roofs program to begin building political support homeowner by homeowner, and he spent years working with legal scholars to ensure that FIT would not be overturned by a European Court of Justice trade law challenge.

By design, many of the first German green energy projects were built on a community or even household scale, often with substantial local investment. In the case of the northern state of Schleswig-Holstein—a largely agricultural region, similar to southern Ontario’s would-be wind-industry heartland—an estimated nine of every ten turbines are community owned, and there are lots of them. The state already gets 100 percent of its electricity from renewables, with plans to become a major power exporter on the strength of its booming wind business. In the village of Galmsbüll, home to a typical Schleswig-Holstein wind farm on the North Sea coast, 430 of the village’s 500 residents have a stake in the turbines, with retirees investing their savings on the strength of 8 percent returns. By the time Angela Merkel, once a strident FIT opponent, came to power five years into the act’s implementation, it was far too popular to be overturned. Even today, as Germans grapple with rising energy prices and a rollback of high tariff rates on solar power, public support for the Energiewende—“energy transition”—remains greater than 90 percent, which is as close to unanimous as opinion gets in a modern democracy.

Perhaps the biggest advantage Germany had, though, was that its market was not dominated by the remnants of a monopolistic public corporation that treated the energy business as its fiefdom. Which brings us to Ontario Hydro, the defunct behemoth whose corporate culture permeated every office of the act’s nominal overseers: the Ontario Power Authority and Hydro One, the province’s electricity transmission and distribution utility.

The sheer size of Ontario Hydro is hard to overstate. In 1999, shortly before it was split up, the utility carried $38.1 billion in debt—a third of the province’s borrowed money. Today, employees of former Ontario Hydro entities occupy 12,500 spots on the “Sunshine List” of public-sector workers who earn more than $100,000—more than 10 percent of the total. In their corporate suites, notwithstanding George Smitherman’s enthusiastic sales mission, FIT was seen as a nuisance, an environmentalist diversion from the real business of grand dams and hulking nuclear power stations that Ontario Hydro alumni consider to be the true and eternal core of their business.

Engineers and technicians who’d dedicated their careers to mass-scale power generation had little interest in tethering a scattering of puny solar panel arrays to the grid. And managers saw no point in prioritizing their regulatory approval, especially if the next Ontario government—widely expected circa 2011 to be Progressive Conservative—would toss out the act and commission the new nuclear facilities they’d been planning for years. Marion Fraser, a longtime bureaucrat and former Ontario Hydro employee who was the content coordinator of the Green Energy Act Alliance in the months leading up to the GEA’s passage, adapts a line from T. S. Eliot to the subject: Between the act and the reality falls the shadow. “And that’s exactly what we had here,” she says. “We had an organization, in the OPA, that didn’t want to do this in any way, shape, or form.”

In a 2011 report, Fraser noted that the OPA proved particularly slow-footed when it came to micro-FIT applications: all those tiny solar arrays that were supposed to proliferate on consumers’ rooftops. By August 2011, nearly 35,000 Ontarians had applied for grid connections under the program, but fewer than 7,000—just 19 percent—had been executed. Moreover, instead of dealing with applications as they were submitted, the OPA had settled on a “batch process,” picking arbitrary deadline dates, after which the door closed for months at a time, creating waves of backlog and frustration.

“It became like a gold rush mentality, where the diligence in terms of the community involvement didn’t happen,” Fraser wrote. “And then the OPA put these extra points on [their applications] for having community involvement or aboriginal involvement. And that’s equally problematic, because you know the developer says, I’ve got to try and get a First Nation or community to sign up, without actually wanting to be in business with them.”

What truly allowed Bow Lake to escape all these traps is one crucial technical detail: its three dozen turbines connect to a regional power grid operated not by Hydro One, which runs 97 percent of the provincial grid, but by a company called Great Lakes Power Transmission. Owing to a historical quirk, the entity traces its origins to the Lake Superior Power Company, established in Sault Ste. Marie in 1894, twelve years before the birth of Ontario Hydro. Because it predates the monopoly’s rise, the region’s grid remained partially outside its control. And so, more than a century later, renewable energy developers found themselves dealing with a far more bureaucratically nimble local partner.

“The waters were easier to navigate,” says Jason Naccarato, the former vice-president of development at the Sault Ste. Marie Innovation Centre (he is now the director of the Ontario Sustainable Energy Association). “Developers could get projects online quicker than they could if they were dealing with Hydro One.” In the Sault, green energy arrived as a unifying force. With the traditional industrial base long in decline, Naccarato notes, businesses and residents alike “were ready to embrace new ways of thinking and new technologies.”

This is no hollow boosterism. Sault Ste. Marie’s renewable energy boom truly has been a collaborative affair. The original plans for Bow Lake, for example, called for placing turbines across a stretch of Algoma wilderness immortalized in a number of Group of Seven paintings. When local experts raised the issue at a community hearing early in the development process, the developers and local officials pursued compromise. In addition to performing the requested archaeological and cultural heritage assessments, the developers consulted with Jim Waddington, an expert on Group of Seven sketching sites whose book on the subject had recently been the focus of an exhibition at the McMichael Canadian Art Collection, in Kleinburg. They also met with their most outspoken local critics.

(Full disclosure: I was a paid keynote speaker at Sault Ste. Marie’s 2014 Energy Opportunities Conference, and I conducted some of my interviews for this piece at that event. My discussions with The Walrus about the GEA, however, predate the conference by more than a year. I first wrote about the ways and means of feed-in tariffs in these pages in the January/February 2009 issue.)

In the end, the wind farm was moved farther away from the main highway to reduce visual impact, and individual turbines were placed outside the frame of some locations depicted in Group of Seven paintings. When the proposal went to a provincial Environmental Review Tribunal, it was approved. All thirty-six turbines are expected to be up and running by the end of 2015.

Because the Sault saw green energy more as opportunity than intrusion, its local grid came to host a wide range of unconventional developments. When Glen Martin, a hometown boy who made good in California as an aerospace engineer, came back with plans for a solar farm, he found a willing audience. “Cold weather and sunshine are great for solar panels,” Naccarato says. “His analysis showed that this was really a good spot to put a solar field. And he went and did it.” In short order, a sixty-megawatt solar farm—the second largest in North America—filled a clearing west of town not far from one of Canada’s biggest wind energy plants (the 189-megawatt Prince Wind Farm, which is older than Bow Lake).

Even before the GEA passed, Algoma Steel had set up a cogeneration plant to generate seventy megawatts of power from waste gases. One of the province’s first solar panel manufacturers, Heliene Canada, has its production line in the Sault. And in 2014, a company called Elementa launched plans to build a pioneering waste-to-energy plant in the city. Martin, meanwhile, brokered a deal between his smart-grid start-up, Energizing Co., and the Ontario Ministry of Energy to use the Sault as a test case for next-generation grid management software. Less than a quarter of the electricity produced by the region is needed locally, so Sault Ste. Marie is now a substantial net exporter of power.

That’s a lot of good news. The trouble is, it all comes from a single small region. Six years after Ontario launched its abortive renewable energy revolution, the Sault is one of the only places where the GEA’s legacy isn’t tainted.

Launched by an energy minister who abandoned his post and a premier who resigned amid scandal, and undermined by bureaucratic foot soldiers whose interest in the fight ranged from indifference to open hostility, this was a revolution destined for failure.

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